Page 68 - IJPS-9-2

International Journal of
Population Studies Relationship between population aging and innovativeness

and small firms contribute heavily to employment creation link between entrepreneurship and innovativeness (Liang
as well as to high-quality innovations (measured by the et al., 2018). Thus, this study aimed to empirically assess
number of patent citations). They concluded that there is the effect of population aging on countries’ innovativeness.
little doubt that entry of individuals into self-employment/ To this end, in the first part of the next section, we will
business ownership and of independent firms into the discuss well-known economic models of technological
market are impetus to economic development in developed progress, clarifying the role of entrepreneurship and
economies. how institutions may shape innovation activities within
Given the importance of entrepreneurs in the economic a country. In the second part of the second section, we
system, it is crucial to further understand whether the will explore the link between aging and entrepreneurship,
rapid aging of populations in many developing countries setting the stage for our research questions. Moving on to
and the large share of elderly individuals, which is a the third section, we will present our data and method. In
typical hallmark of developed economies, will affect their the fourth section, we will show our results which are then
innovative capacity. The potential impact of aging on discussed in the fifth section. Finally, in the last section, we
entrepreneurship is not a new concept in demography. will provide some concluding remarks and considerations.
More than 70 years ago, Sauvy (1948) observed that: “In 1.1. The drivers of innovation
countries suffering from ageing, the spirit of enterprise,
and hence the willingness to accept risks, without which 1.1.1. Entrepreneurship, institutional factors and the
capitalism cannot function, gradually declines and is innovation process
replaced by a new feeling: the desire for security” (p.118). Based on the well-known exogenous growth model
The French demographer’s perspective on aging and proposed by Solow (1956), economic growth is influenced
risk tolerance has received extensive support on the by the growth rate of innovations, which are considered
empirical ground (Löckenhoff & Carstensen, 2007; Mata exogenous factors. Nevertheless, the contemporary
et al., 2011; Mata et al., 2016; Rolison et al., 2014). As we economic growth is determined using endogenous growth
will discuss later, empirical evidence at the individual level models, including the one developed by Romer (1986).
show that the likelihood of becoming an entrepreneur In Romer’s model, population growth can contribute to
decreases after age 50. Furthermore, at the country level, per capita income growth because a larger population
Lamotte & Colovic (2013) have shown that older countries working in the research and development (R&D) sector
are also characterized by less nascent entrepreneurship. can accelerate technological change. However, it is
Population aging is caused by a declining fertility rate, essential to note that Romer’s model neglects the role of the
which reduces the proportion of young people, and an entrepreneur. This omission aligns with Baumol’s famous
increasing life expectancy, which results in a larger share of statement about theoretical growth models: “The theoretical
elderly individuals (Goldstein, 2009). Many demographic firm is entrepreneur-less – the Prince of Denmark has
models are based on the assumption of stationarity, which been expunged from the discussion of Hamlet” (Baumol,
postulates a population with zero growth rate and a stable 1968, p. 66). Treating the entrepreneur as a central figure
age structure. However, fertility rates in many developed in theoretical economic models is a concept by Aghion &
countries have consistently remained below replacement Howitt (1992; 1997); Howitt & Aghion (1998). In these
levels, making stationarity more of a theoretical concept models, the entrepreneur is portrayed as a profit-seeking
than an accurate description of the population process. individual who competes with others to create innovations
Immigration can have temporary rejuvenating effects that provide competitive advantages.
under certain conditions (Schmertmann, 1992; Alho, Human capital and entrepreneurship are vital elements
2008), but in the long run, it would still contribute to an for economic progress. However, institutions also play
older age structure in the host country compared to that in a crucial role in the innovation process. This has been
country without migrants, as suggested by the literature in emphasized by Baumol (1990), who highlights that
general (see Goldstein 2009, for a review). While aging can entrepreneurial activity is categorized as productive and
be construed as a success in terms of reducing mortality unproductive entrepreneurships, and the direction of
rates, particularly among infants, and as a consequence of entrepreneurial efforts depends on the quality of prevailing
improved living standards and health-care systems, it also economic, political, and legal institutions. This institutional
presents various challenges. framework determines the relative rewards of investing
The previous research has predominantly focused on the entrepreneurial efforts in productive market activities
effects of aging on the labor force, the welfare system, and (e.g., R&D) versus unproductive ones such as political
the increasing need for long-term care while neglecting the lobbying and lawsuits. Good institutions characterized by

Volume 9 Issue 2 (2023) 62 https://doi.org/10.36922/ijps.0429